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Since we last spoke... Te Puna Whakaaronui 23 March 2023

NEW ZEALAND'S FOOD AND FIBRE SECTOR THINK TANK

In this issue:

  • Identifying priority areas of the blue economy
  • High carbon price – an innovation incentive?
  • Technology to maintain resilient renewable energy production
  • We have been looking at...

Identifying priority areas of the Blue Economy

Yesterday saw the release of the Hatch and NZTE innovation launchpad. It joins other New Zealand blue economy initiatives: the Sustainable Seas Challenge and the Blue Economy Aotearoa project, as well as a Blue Carbon Services/NIWA joint project estimating natural kelp-carbon sequestration.

New Zealand is not alone in looking at blue economy strategies, many jurisdictions have already begun implementing policy measures, including India, Portugal, Mozambique, the EU, and Fiji. Blue economy funding mechanisms are also being put in place by Kenya, the Development Bank of Latin America, the European Investment Bank and through the United Nations Development Programme the Blue Accelerator Grant Scheme.

G20 members and invited guest nations discussed their perspectives on blue economy last week at the Senior Officials Meeting of the Supreme Audit Institutions (SAI20) Engagement Group in preparation for an SAI Summit in June 2023 – the output of which will be a set of priorities that could inform conversations on blue economy scenarios for New Zealand. Comptroller and auditor general (CAG), Girish Chandra Murmu, pitched for greater collaboration among G20 nations towards bolstered audit frameworks for the sustainable use of ocean resources for economic growth.

As an isolated island nation, the marine environment is a significant transport, food production, tourism and recreation resource. International interest and investment into the blue economy will continue to grow as countries move to meet their commitments under the Sustainable Development Goals by 2030.

What knowledge can New Zealand gain from other jurisdictions and the summit in June to help inform the development of our future blue economy?

High carbon price – an innovation incentive?

European carbon allowance (EUA) permit prices reached a six-month high mid-February, with the December 2023 futures contract hitting above €100 (per tonne carbon). Some analysts are predicting new price highs through 2023; Bloomberg estimates a €150 by the end of 2023. This increase has been driven by a number of factors including: cold temperature forecasts, more ambitious climate targets, revisions of the EU emission trading system and an increase in carbon credit purchases to comply with existing obligations.

It’s at €100 per tonne and above that we start to see greater incentive for fuel-switching and investment into low-carbon innovation and technology, according to Reuters. However, even after aggressive de-carbonisation efforts, many companies will be with left with residual emissions that will result in additional costs for the companies.

Even with New Zealand’s Emission Trading Scheme (ETS), the goal of reducing emissions by 50% below gross 2005 levels by 2030 may not be met purely by domestic emission reductions. At some point we will begin buying international emissions units to make up the shortfall, according to the Climate Change Commission, in their Advice on NZ ETS unit limits and price control settings for 2023-2027 document. The Commission predicts domestic per tonne prices in 2030 could range from NZ$75 to NZ$270 (in 2022 dollars), whilst international prices in 2030 could range from NZ$43 up to $319 per tonne.

The potentially high per tonne prices for carbon emissions could be an opportunity for New Zealand were able to reverse the current likely scenario, i.e. become an exporter of emissions units rather than relying on imports to meet our emissions reduction goals. How then, could food and fibre producers innovate to operate carbon positive models that would allow them to create a revenue source with associated environmental benefits?

Technology to maintain resilient renewable energy production

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New Zealand continues to move towards renewable commercial electricity generation, using a mix of technologies. Geothermal generally accounts around 18% of renewable energy production in New Zealand, however, new geothermal technology could improve energy system resilience.

According to recently released MBIE data, 94.7% of all electricity commercially generated in New Zealand was renewable in the last quarter of 2022 – the highest share since records began in 1974. However, this figure reflects the exceptionally wet weather experienced by the North Island and the resulting increased hydro-generation capacity, and should therefore be treated as an outlier. We will require long term investment to maintain high levels of renewable energy production capability, without relying on extreme weather events to get us there.

Hydro-lakes are currently high – 96% full on average across the North and South island – but this can (and will) change depending on rainfall levels. Climate change is likely to have variable impacts in the future, which will alter the reliability of hydropower as a source of renewable power generation in the future. Alternative options with base load capability that are scalable may therefore be needed if New Zealand is to continue having high renewable energy generation.

In 2021, the Climate Change Commission predicted that the grid would be 95% renewable sometime between 2030-35. If we consider that 2020 and 2021 saw 81.1% and 82.1% respectively of national grid electricity generation from hydro, there remains a 15% gap that needs to be filled – plus any additional demand that arises between now and 2030-35.

Newly tested geothermal energy production technology could play into the future resilience of the New Zealand energy grid. Houston-based Fervo Energy has created a flexible geothermal power plant that can be shut off to store energy for hours (or even days), effectively acting as a large, long-lasting battery. In addition to the storage capabilities, Fervo Energy’s technology can be applied in more locations than our current geothermal technology due to their drilling capability – all while being lower cost that current operations. This technology could support a more resilient supply during months when solar or hydro electricity generation capacity is reduced.

Sustainable energy production isn’t a ‘this or that’ conversation. In New Zealand, where we have access to wind, solar, hydro and geothermal energy the conversation is more about how to best optimise the use of all four technologies to maintain high levels of resilient renewable energy production in the future.

We’d love to hear from you! Let us know what you think, email us at: tepunawhakaaronui@mpi.govt.nz

We have been looking at...

  • The collapse of the Silicon Valley Bank isn’t just a tech industry problem – here's why.
  • AgResearch scientists are developing a tool to help sheep farmers better predict when their animals are likely to be heat-stressed.
  • A collaborative team including AgResearch, Massey University and Waka Digital have obtained funding through the Our Land and Water National Science Challenge to build a ‘digital gateway’.
  • Apple crops likely fifth smaller this season due to Cyclone Gabrielle damage.
  • High inflation and reduced livestock prices could see farm profits fall more than 30%, according to Beef + Lamb New Zealand.
  • The kiwifruit crop, which is New Zealand’s biggest horticultural export, could be down by 20% this season.
  • Cargill aims to be an inclusive protein provider with portfolio, recent partnerships.
  • A new study from Newcastle University found that individuals who ate a Mediterranean-like diet had up to 23% lower risk for dementia than those who did not.
New Zealand's Primary Sector Think Tank

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Published by Te Puna Whakaaronui. Not government policy.